Loss of major contract threatens to close Corus’ Teesside plant

Tuesday, 12 May 2009 17:11:34 (GMT+2)

On May 12, Anglo-Dutch steelmaker Corus, which has been owned by Indian conglomerate Tata since 2007, announced that four international slab buyers have terminated their 10-year contract with the company, ending their offtake of products from Corus' UK-based Teesside Cast Plant (TCP).

In 2004, four companies, Italy-based Marcegaglia SpA, South Korea-based Dongkuk Steel Mills, Duferco Participations Holding, a unit of the Swiss-based Duferco Group, and Alvory SA, a subsidiary of Argentina's Ternium SA, signed a 10-year offtake framework agreement (OFA) with Corus and committed to buying about 75 percent of TCP's slab products at cost and to paying a portion of the plant's capital expenditure requirements among other things.

In a statement on the issue, Corus has said, "The company has today begun discussions with employees and their representatives about what can be done to mitigate the impact of mothballing the plant on the 1,920 employees and what future action may be needed. Any decision to mothball is likely to lead to a very significant number of redundancies."

On the other hand, in a statement released on behalf of the four offtakers, it is alleged that they notified Corus of the termination of the OFA on April 7, 2009. According to their claims, the termination was based on an occurrence of events which, under the agreement, Corus had agreed would entitle the offtakers to terminate the agreements.  The offtakers said therefore they believed that the termination was lawful and categorically reject the claims asserted by Corus that the offtakers failed to perform their obligations under the agreement. 

Following the termination, Corus sought before the High Court an injunction requiring the offtakers to fulfill their part of the contract. After two hearings, the Court refused to grant the relief sought by Corus.  The offtakers also said that they had proposed to Corus that they would purchase six weeks of steel at market rates, a proposal which the Court stated went a long way to meet the difficulties which Corus claimed it is facing.  

While Corus will also explore alternative options that might secure a viable future for TCP and its employees, the offtakers said in relation to Corus's announcement as to the possible shutdown of the TCP plant, they regret the impact that will have on TCP's employees and their families; however any decision as to the future of TCP rests entirely in the hands of Corus. 

Furthermore, Corus had agreed to sell a majority stake in the plant to a consortium led by Italian firm Marcegaglia. Last week, however, Marcegaglia chairman Steno Marcegaglia said that the company would back out of its earlier plan to acquire the Teesside assets of Corus.

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